March 30 (Bloomberg) -- Oaktree Capital Group LLC, the
world’s largest distressed-debt investor, filed to raise as much
as $517.5 million in an initial public offering. Co-founders
Howard Marks and Bruce Karsh are set to get about 40 percent of
the proceeds from the sale.

The firm plans to sell 10.3 million shares at $43 to $46
each, Los Angeles-based Oaktree said today in a filing with the
U.S. Securities and Exchange Commission. Some of its existing
shareholders, including Clipper Fund Inc., will sell nearly 1
million shares.

Oaktree’s planned share sale could offer a glimpse at
investor appetite for IPOs by larger asset managers. Carlyle
Group LP, the Washington-based private-equity firm that manages
$147 billion, is set to go public this year after weighing an
IPO since at least 2007.

“Ultimately, I think public investors are going to view
both Carlyle and Oaktree in a similar fashion,” Douglas Kelly,
a Santa Monica, California-based analyst at IBISWorld Inc., said
in a telephone interview. “The difficulty in understanding
alternative asset companies -- as far as their business, the
transparency around the valuations they’re reporting and the
returns they’re advertising -- is about the same.”

Oaktree expects to receive about $426 million from the sale
if the shares are priced in the middle of the range. All of the
proceeds the firm receives will be used to buy interests from
the firm’s principals, employees and investors, it said in the
filing.

Purchase Option

Underwriters of the IPO have the option to purchase an
additional 15 percent of the total shares being offered by
Oaktree and the selling shareholders, the filing shows, which
would bring the total raised to $595 million.

The firm was started in 1995 by Marks and six partners from
Los Angeles-based investment firm TCW Group Inc. Marks, 65, is a
billionaire who owns about one-sixth of Oaktree. He named the
firm for the English translation of his Santa Barbara,
California, weekend home, Las Encinitas.

Marks and Karsh, the firm’s president, will each be paid
about $101.9 million from the IPO’s proceeds, according to the
filing. John Frank, a managing principal, will receive about
$4.8 million; Caleb Kramer, a managing director, will get about
$4.3 million; and Stephen Kaplan, a principal, will be paid
about $3.7 million, the firm said.

‘Orderly Succession’

Oaktree is already transferring some responsibility from
its principals to the firm’s next generation of managers “as
part of an orderly succession process,” it said in the filing.
The firm will no longer pay Kaplan a direct share of management
fees, it said, and will instead pay him fixed quarterly payments
that represent about 75 percent of the amount he would otherwise
have received.

“We have no plans to depart -- either voluntarily or
involuntarily -- but I guess it will prove inevitable,” Marks
wrote in a March 2 letter to clients. “As part of a gradual,
ongoing process, each of our principals is transitioning some of
their responsibilities to our next generation.”

Scott Graves, Bob O’Leary and Rajath Shourie were named co-portfolio managers last year for the ninth distressed debt fund
the firm is raising, according to the letter. Graves will also
be involved in corporate strategy and development.

Other IPOs

Oaktree, which managed about $75 billion as of Dec. 31, is
selling shares in the wake of mixed results from leveraged-buyout firms Blackstone Group LP, Apollo Global Management LLC
and KKR & Co. since they went public. Oaktree raised about $1
billion in May 2007 when it sold a 15 percent stake on the
private exchange run by Goldman Sachs Group Inc., a transaction
valuing the company at $6.3 billion.

Blackstone, the world’s largest private-equity firm, raised
$4.1 billion in its 2007 IPO, a year before the collapses of
Bear Stearns Cos. and Lehman Brothers Holdings Inc. The shares
have fallen 50 percent since. Apollo has declined 24 percent
from its offering a year ago, while KKR has risen 40 percent in
New York trading since its July 2010 share sale.

Goldman Sachs and Morgan Stanley are among underwriters for
the offering, according to the filing. The shares will trade on
the New York Stock Exchange under the ticker symbol OAK.